Improving Customer Fill Rates for On-Time Deliveries
Be On Time or Be Gone
With the advances in supply chain, lean manufacturing, Just in Time and other modern techniques being implemented by our customers, it has become more and more critical for a manufacturer to focus more on fill rates for on-time deliveries. Creating a work stoppage in your customer’s operations with late deliveries is now more expensive than it has ever been. The fastest road to extinction is fail to deliver your customers’ needs on-time. In fact, your ability to beat foreign competition is predicated on the premise that you can deliver faster and more reliably.
Fill Rate- Answers to the Late Delivery Problem
This is the first in a series of articles on how to significantly improve your fill rate for on-time production deliveries. In this first article, we will identify some of the most common underlying causes of low fill rates and late production deliveries. In future posts we will take each individual low fill rate cause and elaborate further on the underlying problem while also suggesting effective solutions for those fill rate problems.
Fill Rate- Top Causes of Late Deliveries
We find that most low fill rates and late deliveries are caused by one of the following:
1. Capacity planning
You’ve heard the old adage- “Failing to plan” is the same as “Planning to Fail”. In production planning, the adage could never be truer. If you do not include capacity planning into your production planning efforts, you are planning to have machine bottlenecks that will guarantee you low fill rates and late deliveries. And, if your systems don’t alert you to overloading, you will suffer the same consequences. Your fill rates will be low, and your deliveries will be late.
2. Stale or error prone standards
ERP manufacturing systems allow you to meticulously plan your operations to minimize inventories, queue times, and other production wasting activities. The planning is based on the maintenance of standards that reflect the actual current situation. If your standards are not up-to-date, your results will be significantly reduced. Let’s illustrate this topic with an example. Let’s say that your cycle times are now longer due to quality problems. The failure to update your MRP schedules will cause jobs to be scheduled for that operation before they can be started causing a bottleneck. This, in turn, will cause a delay in every order that runs through that operation. You can easily imagine how numerous incorrect standards will quickly escalate to very poor results throughout the shop. An ERP manufacturing system will ease this problem by making the updating more easy, but only if updating it is a priority of your management. And, the end result of bottlenecks will be low fill rate and late deliveries.
3. Inaccurate data
Another adage for you to consider, “Garbage In, Garbage Out”. There isn’t a system in the world that can produce quality results if the data inputs are error ridden. If your cycle times are incorrect, or your vendor lead times stale, you are not going to plan and execute successfully. Your processes absolutely need to incorporate methods to reduce these errors. Today’s ERP manufacturing systems offer many techniques to eliminate these errors. These include reasonability and input checks, such as validating part numbers, quantities, operation numbers, etc. and shop floor data collection which automates the input though scanning prerecorded bar codes. Don’t let errors cause low fill rates and late deliveries in your organization.
4. Lack of Alerts or Exception Reporting
Even if your standards are correct, and your data accurate, you still need immediate visibility into activities that are veering off course. You can only take action, when you know something is wrong. Good production systems provide reports, real time graphs, and most importantly, alerts and exception messages of critical problems, so that you not only receive alerts when something is wrong, but also when something will go wrong. Lack of real time reporting is definitively one the inherent weaknesses of manual systems, which have no direct way of warning you of potential dangers. ERP manufacturing systems can provide you the correct feedback for every situation in your business, from the front office to the back office and on the plant floor. You, of course, will need to build these tools and practices into your management culture. The end result- higher fill rates and on-time deliveries.
5. Operations efficiency error
This topic could easily be included in the standards discussion above, but it is violated enough to deserve special mention. Most ERP systems assume that individual operations are running at 100% efficiency. Yet, in many shops, this just isn’t true. Production management needs to be diligent in monitoring the productivity, and quickly reacting to problems. It doesn’t take a brain surgeon to realize that constrained operations planned at 100% efficiency will subsequently cause low fill rates and late deliveries. An efficient ERP system will allow you to build in predictive inefficiencies and queues at critical operations.
6. Out of plan promises
Even if you know your capacity constraints, you can almost guarantee late deliveries by accepting customer orders beyond the capacity of operations. This happens often enough to be mentioned, and is often the result of a special order from a big or special customer. Full-functioned ERP systems assist with this problem by incorporating “What If Scheduling ” capabilities that can identify a make-able promise date, without re-running MRP. Now you can have true visibility into your possible fill rate and on-time deliveries.
7. Failing to include the true time of purchasing
Another common area for miss-planning is in the time stated for the whole purchasing cycle. Most people include the lead time for the part once the order is placed. There can be, however, significant time involved in preparing the order prior to its issuance. Tasks such as preparing the order, obtaining approval, preparing special instructions, and others can cause the lead time to grow. This can cause delays in receipts of parts which are needed to make production schedules. Late vendor deliveries quickly turn into low fill rates and late deliveries for your operations.
8. Poor insights from current systems
Let’s face it. Manual systems or spreadsheet based systems cannot offer the insights necessary except in the smallest of circumstances, and even there, the “islands of information” that spring up cause many instead of one source of the truth. Additionally, computerized systems can also fail unless they offer all the full functions necessary, with complete integration across all the application areas. You can’t fix your fill rates, and deliveries if you can’t even see them.
9. Poor Demand Management
For companies where their product production lead times exceed their customer required lead times, a sales forecast is required. This forecast must be as accurate as possible, or it will result in either low customer fill rates or excess inventory. Often, companies base their forecast on sales rep promises, which are designed to be manager- pleasing schedules. A manufacturer must create forecasts that are based on scientific inputs, and updated as new factors arise.
10. Missing the Overall Picture
Your customer is concerned about one single thing- the status of his individual order. When he checks that status, your production systems had better be able to offer an expansive and detailed view of exactly where that order is and the precise projected date of delivery. Fortunately, the latest in ERP manufacturing systems provide details on projected fill rates and the details behind them.
– This article was prepared by Harry Mosesian, a long-time employee of WorkWise, Inc., a supplier of solutions for the small to medium sized manufacturer – in both software and consulting expertise. WorkWise is also the provider of Role-Based ERP, the latest innovation in ERP manufacturing systems, providing the highest productivity and ease of use in the industry.-